OECD slashes Japan’s GDP forecast

Economic output will suffer initially due to earthquake and tsunami but will pick up once rebuilding gains pace, report says Japan’s economy will slow significantly this year after the devastating earthquake and tsunami on 11 March, with the government needing to cut spending to rebuild the country’s battered north-east coast and ensure faster growth next year, the Organisation for Economic Cooperation and Development (OECD) said on Thursday. GDP will expand 0.8% this year, down sharply from the 1.7% growth previously forecast. But as reconstruction spending gains pace, the economy will expand 2.3% in 2012, faster than previous estimates for 1.3% growth, the OECD said. Japan still required fiscal discipline and needed to raise sales tax from 5 to 20%, it warned. “The immediate impact of the disaster is likely to be large, extending beyond the areas devastated by the earthquake and tsunami. The experience of past disasters in Japan and other developed countries suggests that the negative short-term impact on economic output will be followed by a rebound as reconstruction spending picks up,” the report said. Japan is facing its worst crisis since the second world war. The magnitude 9 earthquake and a tsunami towering more than 10 metres left nearly 28,000 dead or missing and triggered radiation leaks at a nuclear power plant. The government estimates the material damage alone could top $300bn (£181bn), making it by far the world’s costliest natural disaster. Shortages of electricity and parts suggests long disruptions that could harm factories in other countries. Japan’s output could recover by the third quarter of this year, but private consumption could remain subdued due to weak consumer sentiment, the OECD said. The government is likely to submit to parliament a ¥4tn yen (£29.3bn) extra budget to remove debris and build temporary housing. It will avoid issuing new debt but politicians concede bond issuance is needed for future spending. Deflation will prevent the economy from expanding quickly enough to close the gap between supply and demand before the end of 2012, the report said. Global economy Japan Japan disaster guardian.co.uk

Posted by on April 21, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.